Do Electronic Medical Record Systems Inflate Medicare Reimbursements?

43 Pages Posted: 11 Jan 2016 Last revised: 16 Dec 2016

See all articles by Kartik K. Ganju

Kartik K. Ganju

McGill University

Hilal Atasoy

Temple University - Department of Accounting; IZA Institute of Labor Economics

Paul A. Pavlou

University of Houston - C.T. Bauer College of Business

Date Written: January 8, 2016

Abstract

Electronic Medical Record (EMR) systems allow physicians to seamlessly enter information in patient records compared to traditional paper-based records, potentially leading to higher quality and efficiency of patient care. On the other hand, the ease of capturing information into electronic medical records can be deliberately used by hospitals to inflate their reimbursement requests from Medicare by overstating the complexity of patients’ diagnoses (termed “upcoding”). A particular EMR module that can facilitate upcoding is the Computerized Physician Order Entry (CPOE) system, which provides physicians auto-populated default templates and allows them to copy and paste data from previous patients’ records. Accordingly, CPOE systems were alleged to allow physicians to report sicker patients and more intensive care. Concerns for upcoding have been widespread, and they led to a Recovery Audit Program by the Centers of Medicare and Medicaid Services (CMS) to combat the false (up)coding of patients. In this study, we examine the relationship between the adoption of CPOE systems and the case mix index (“CMI”) (aggregate complexity of all patients’ diagnoses) that hospitals report to Medicare. We find that, on average, the adoption of CPOE systems is associated with an increase in the case mix reported by hospitals, and our estimates correspond to a $300 million increase in inflated Medicare reimbursements per year. The increase in the case mix index after the adoption of CPOE systems is significantly higher among for-profit hospitals. By leveraging the staggered implementation of the Recovery Audit Program as a quasi-natural experiment, we find that the Recovery Audit Program attenuates the role of CPOE systems in inflating the case mix that hospitals report to Medicare, thus helping to combat upcoding. Interestingly, auditors who developed the capability to identify the use of default templates and cloned information are able to reinforce the effect of the Recovery Audit Program on combating upcoding. Implications for theory, practice, public policy, and society toward preventing inflated Medicare reimbursements from taxpayers’ dollars after the introduction of EMR systems are discussed.

Keywords: Health IT, Electronic Medical Record Systems, Upcoding

JEL Classification: L21; M21

Suggested Citation

Ganju, Kartik K. and Atasoy, Hilal and Pavlou, Paul A., Do Electronic Medical Record Systems Inflate Medicare Reimbursements? (January 8, 2016). Fox School of Business Research Paper No. 16-008. Available at SSRN: https://ssrn.com/abstract=2712758 or http://dx.doi.org/10.2139/ssrn.2712758

Kartik K. Ganju (Contact Author)

McGill University ( email )

1001 Sherbrooke Street
Montréal, H3A 1G5
Canada

Hilal Atasoy

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Paul A. Pavlou

University of Houston - C.T. Bauer College of Business

Houston, TX 77204-6021
United States

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